Russell 2000 Index Hits New Highs As Small-Cap Stocks Rally

After trailing mid-sized and large cap stocks for more than a decade, the Russell 2000 is once again hitting all-time highs.

On Dec. 10, the Russell 2000 reached an all-time intraday high of 2,576.31 before closing just shy of its record 2,576.31.

Analysts say small-cap stocks are performing well as the U.S. Federal Reserve lowers interest rates and investors begin to rotate capital out of mega-cap technology stocks.

Lower interest rates tend to benefit smaller companies disproportionately as they often borrow more money to fund their operations.

The Russell 2000 has now risen 14% since August, outpacing the benchmark S&P 500's 6.9% gain and the technology-heavy Nasdaq Composite index's 10.3% rise over the same period.

Many smaller industrial and manufacturing companies have been rallying as the U.S. central bank delivered three 25-basis point rate cuts in a row.

At the same time, many small-cap retailers such as Abercrombie & Fitch (NYSE: $ANF) and The Gap (NYSE: $GAP) are rallying during the busy year-end holiday shopping season.

Both GAP and ANF stocks have increased more than 10% in the past month alone.

Many analysts expect further gains from small-cap stocks during the first half of 2026 as investors cool on the artificial intelligence (A.I.) trade and interest rates trend lower.

The Russell 2000 index is now up 15% on the year, its strongest showing in about a decade.

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